In upholding a lower court ruling, the 6 th US Circuit Court of Appeals threw out the fiduciary breach suit against LMES filed by technology employees who were outsourced to Science Applications International Corp. (SAIC).
The appellate ruling, written by Circuit Judge Deborah Cook, asserted that there was no breach of the Employee Retirement Income Security Act (ERISA) when SAIC realized the proposed LMES rollovers would be barred by an Internal Revenue Service (IRS) rule. LMES then asked about doing “trust to trust” transfers, but SAIC refused, the opinion indicated.
Both Cook and the lower court judge in Tennessee ruled that the sequence of events did not trigger ERISA’s fiduciary requirements. The participants’ suit alleged they were mislead about the rollover potential.
Cook ruled that ERISA permitted LMES to wear “two hats,” one as a plan fiduciary and the other as an employer. The appeals court rejected the employees’ contention that LMES’s fiduciary duties were triggered when, during the process of implementing its business decision to outsource the IT division, it misled the employees about their ability to rollover their 401(k) balances.
The decision in Adams v. Lockheed Martin Energy Systems Inc., 6th Cir., No. 04-6204, unpublished 8/21/06, is here .